Musk vs. Trump: American Business and Government at Loggerheads?

When the wealthiest person in the world and the President of the United States cross swords, people are bound to notice. Such a very public clash between billionaires, one of whom is the most politically powerful person in the U.S., should not lead the rest of us to infer that the interests of large corporations and the U.S. Government, including the respective executives and elected representatives, typically conflict. Corporate and individual mega-donations to political campaigns, the proverbial “revolving door” between working in government and at a corporation, the reliance of regulatory agencies on information from the regulated companies invite the exploit of conflicts of interest such that legislation and regulations are even written by corporate lawyers for their respective companies’ financial interest. Furthermore, that many very large American-based corporations have interlocking boards of directors gives corporate America considerable unified force in seeing to it that Congress and the federal president remain friendly to business interests. That both benefit from the status quo and have de jure or de facto vetoes of reform proposals reinforces the staying power of the club. Even as U.S. Senator Bernie Sanders enjoyed considerable media attention and crowds in his speaking tour against oligopoly (i.e., consolidation within an industry such that companies can set prices at will and can thus extract extra profit beyond that which would accrue in a competitive market), it would be wildly optimistic to hope for an onslaught of anti-trust enforcement from a Republican or Democratic administration.

Even though U.S. President Trump claimed in early June, 2025, that he had told Elon Musk to leave the Administration because Musk was “wearing thin,” and Secretary of State Rubio would doubtless attest to that, it should not be forgotten that Musk had spent more than $250 million “helping President Donald Trump win a second White House term.”[1] Musk “also spent more than $19 million in the final weeks of the 2024 election cycle to help Republicans win narrow majorities in Congress.”[2] Even though Musk was the richest person in the world at the time, to spend so much money and yet be inattentive to how his companies could benefit from government contracts and electric-car subsidies defies human nature. Indeed, even though Musk denied opposing Trump’s tax and government spending “Big Beautiful Bill” because of the cuts to EV subsidies, Trump had a point that the negative financial impact on Tesla was not a point in the bill’s favor to Musk. To be sure, Musk’s complaint about too much “pork” and thus deficit spending being major problems in the bill that the U.S. House had recently passed by a single vote is valid. Nevertheless, lest it be assumed that a dispute on public policy between two billionaires is in the interest of the poor and middle-class, Musk registered no complaint about the cuts to Medicaid, which finances healthcare for the poor who cannot afford private health-insurance, and food assistance for the poor.

Even in the midst of an argument between billionaires in business and government, we cannot assume that the conflict of political-economic interests among the elite results in the enactment of public policy that is in the public interest. In Trump’s bill, for example, even though less money would subsidize electric vehicles, there were no reductions of subsidies in the bill that passed the House for coal and oil companies. The grip of those companies in Congress and the Trump Administration could be assumed to be tight in spite of the global average temperature having reached 1.5C degrees, which the Paris Accord of 2016 set as a threshold. The cozy relationship amid climate change puts in stark relief the distinction between private interests and the public interest.

When asked at the Qatar Economic Forum in 2025 whether he would continue making political donations as he had in 2024, Musk replied, “I think I’ve done enough.”[3] It should not be missed that he added, “Well, if I see a reason to do political spending in the future, I will do it.”[4] It would be of value to the American political economy if he would do contribute to political campaigns aimed at breaking up the cosy relationship that CEO’s and (and the corporations) have with elected officials and regulators at both the state and federal systems of government in the U.S.; by “breaking up,” I mean something more substantial and structural than barring government officials and employees from being hired by corporations that have benefitted from the work of the officials and employees.

Instead, I recommend a return to competitive markets and even possibly limiting political-campaign contributions of corporations and the ultra-rich, for the financial influence of large concentrations of wealth on elected officials and appointees tilts the political economy away from being oriented to the public interest, which is not arrived at by the entanglement of certain powerful private interests. To be sure, going so far as trying to eliminate the gravitas of wealth politically would be utopian and thus a fool’s errand, but public policy could be formulated and enacted that is aimed at reversing or countering at least some of the self-interested tilt of the American political economy that so benefits members of the club—Trump and Musk included. Nor is Socialism necessarily the answer to protecting the poor and middle-class from the self-interested endeavors of the interlaced economic and political elites, for Adam Smith’s invisible hand can do wonders to regulate price if only competition is restored to oligopolistic industries, which includes even social-media companies.

Trump’s threat to cut off Musk’s SpaceX from government contracts and Musk’s acknowledgement that he might make sizable political donations even though he was disappointed in Trump’s bill for its pork and probable significant addition to the U.S. federal debt indicate that politicians have considerable discretion being able to benefit companies financially and that CEO’s can make use of such discretion by legally paying off political candidates and those office-holders who are up for re-election and would all too easy exploit a personal conflict of interest by bending public duty to private campaign-interest. Using ambition to check ambition is part of the genius of the American political system of checks and balances, but as the ambitions are solely among the wealthy, it cannot be assumed that the public interest is necessarily being served by the resulting public policies, for collusion even between contending ambitions does indeed exist even if the publicly-aired arguments among the elite of the political economy are more titillating.

1. Kevin Breuninger, “Elon Musk Says He Will Spend ‘A Lot Less’ on Future Campaign Donations,” CNBC.com, May 20, 2025.
2. Ibid.
3. Ibid.
4. Ibid.

Political and Economic Elites

I submit that in virtually every political party, a distinction can be made between the “rank and file” and the political elite. Kamala Harris may have lost to Donald Trump in the 2024 U.S. federal-presidential race in part because Harris had not spoken out enough on economic issues amid soaring inflation on groceries and rents to gain traction with Democratic and Independent voters who had had enough of the “woke” ideological agenda, which includes, for example, moral pressure and even demands that people announce their “pronouns” before speaking. Although President Biden had initiated some anti-trust judicial action, the industry-oligopoly of meat producers, for example, was left untouched. So too were the mega-grocery-store chains. Kroger was later found to have spiked egg and milk prices above the increased costs with impunity, yet Harris did not suggest that the Sherman or Clayton anti-trust acts should be taken out of the garage for spin on the American judicial highways that connect the rank-and-file party-members to party elites mainly in New England, New York, and California. I contend that U.S. Senator Bernie Sander’s anti-oligopoly speeches in conservative Congressional districts gained such numbers in 2025 precisely because the Democratic Party’s elite had lost touch with the party’s “rank and file” voters on economic issues.[1]

In early May, 2025, Faiz Shakir, a top advisor to Sanders, castigated elected Democrats who want “to talk down to” voters as if ordinary people are “just too dumb to understand the general notions of powerful elites running” the show, presumably both in politics and business.[2] I don’t think it is lost on many Democratic voters that Democratic office-holders taking campaign donations from oligopolistic companies have been less than willing to urge the U.S. Department of Justice to prosecute large companies on the basis of restraint of trade. Virtually no elected official in government who takes a significant amount of “corporate cash” would be willing to propose a law strengthening anti-trust law such that governments in the U.S. would have a duty to restore monopolistic and oligopolistic industries to market-competition even if the existing firms are not colluding on price or other matters.

For example, since its early days, Facebook (then Meta) has actively bought out budding potential competitors. Social media became an oligopolistic industry in part because of that strategy. Whether or not Meta has engaged in restraint of trade, the U.S. Department of Justice could be given the legal mandate to break up the large American social-media companies in order to bring about a competitive industry. A monopolistic or oligopolistic industry cannot be counted upon to metamorphosize itself naturally into a competitive market; rather, the reverse tends to occur. Hence the need for government to act to perpetuate competition in industries.

This is not to say that Democratic and Independent voters would or should accept Sanders’ platforms of “Medicare for All” and free college-tuition at public colleges and universities. Rather, his “relentless focus on economic policy” could have improved his party’s chances to retain the federal presidency by countering “swing voters’ belief [that] Democrats are too close to feckless institutions and too obsessed with culture war issues.”[3] U.S. Senator Chris Murphy, also a Democrat, observed about six months after the 2024 election, “We viewed people like Bernie as an outlier threat to the institutional Democratic Party, when in fact what he was talking about and is still talking about is the crossover message. And it pulls Trump voters back into the Democratic coalition.”[4] Both the Hilary-Clinton-dominated party elite in 2016, which was rather unfair to Sanders, and the Kamala-Harris presumptive-nominee fiat in 2024 demonstrate the lack of willingness of the party’s elite to select its nominees for president by competitive (and fair, open) contests. This lack of political competition mirrors the lack of economic competition that has continued to plague many American industries at the expense of consumers.

Lest the attention on price-spikes from President Trump’s tariffs monopolize the public discourse on prices that American consumers must pay to have even staple products, another, more widespread, reason for higher prices may be right under their proverbial noses and yet many Americans, both as voters and consumers, may continue to be oblivious to the bad odor of greed that has fueled collusion not only within industries, but also between business and government. An anti-elite populism preached by Democratic candidates and office-holders who refuse corporate donations could really make a difference in setting the Democratic Party apart from not only Trump’s Republican Party, but also the status quo itself, whose gravitas can be likened to that of the Earth in its magnitude and relentlessness. Elites may have such a foothold in American politics and business that many party-members and consumers may be left with only a vague instinctual sense that “the gig is rigged.” For the powers that are able to frame the contours of debates on issues, including on which issues will be debated publicly, do so with a keen eye on retaining and even gaining power and wealth. Hence making the contours explicit, and uncovering the underlying vested interests, is vital to restoring bottom-up democracy and competitive markets in the United States. Faith in American democracy may boil down to the precipitate of ordinary people resisting entrenched, powerful interests even in their own political parties.

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1. An oligopoly is an industry in which a few companies dominate. An oligopoly is between a monopoly and a competitive market. Prices on products can be higher than necessary, the surplus revenue going to profits. Sellers are price-takers rather than price-setters in a competitive market, whereas companies in an oligopolistic industry have sufficient market-power to set prices because consumers have few choices.

2. Igor Bobic, “Bernie Sanders: Resisting Trump Is ‘Not Good Enough’,” The Huffington Post, May 6, 2025.

3. Ibid.

4. Ibid.

Speculators and Price Volatility: The Case of Gasoline

According to The Huffington Post, “Oil prices took a nosedive [on May 5, 2011] in a historic selloff, erasing weeks of gains and indicating that the months-long climb in energy prices may have hit a ceiling. Crude oil plunged 10 percent as startled investors unloaded their positions and a weeklong decline accelerated into an outright freefall. The price of U.S. crude went from triple digits to double digits, falling below $100 after opening at close to $110. Brent crude, a European benchmark, lost $12 at one point in a sell-off that exceeded the one following Lehman Brothers' collapse.”  The question, for course, is why, the answer of which can lead us to consider some public policy recommendations. Understanding the previous price rise is a first step both to answering this question and for evaluating public policy solutions.

The price of oil had been increasing, according to the Huffington Post, “as fighting escalated in the Middle East and investors feared a supply shortage.” Even as the Organization of Petroleum Exporting Countries was pledging to correct any oil supply disruption, the price of a barrel of crude continued to rise. Before the drop, Brent was up 50 percent compared to the same time the year before. Indeed, the rise could not be explained in terms of actual supply being threatened, as Libya represented only 2 percent of world supply at the time.

The fear was likely of a domino-effect that could potentially compromise even Saudi crude—as if Sunni protesters in Bahrain would spill over into Saudi Arabia (rather than tanks from the latter “spilling over” into Bahrain).  The fear, in other words, may have been exaggerated—even facilitated by speculators taking advantage of the general sense of instability in the Middle East. "Clearly these markets were overblown," said Nariman Behravesh, chief economist of IHS Global Insight. "We've been saying all along the fear factor has probably added 10 to 15 dollars to the price of a barrel." The ensuing “freefall” might have been a correction for this “fear factor.”

However, that the oil-price drop was accompanied by other commodities and even stocks could suggest that larger forces were involved. According to Reuters, “World stocks fell and the 19-commodity Reuters-Jefferies CRB index dropped more than 4.9 percent, heading for its biggest weekly decline since December 2008.” An oil-centered drop alone could be expected to result in higher stock prices as expected lower gas prices would be expected to have a stimulating effect on the U.S. economy. So it would appear that broader factors were at play—things that could have triggered the fear-correction.

Reuters reports that “(w)eak economic data from Europe and the United States fed concerns that have battered commodities all week. German industrial orders fell unexpectedly in March while U.S. weekly jobless claims hit eight-month highs, sparking a fourth day of profit taking in early trade. . . . Additional pressure came from news OPEC was considering raising formal output limits when it meets in June to convince oil markets it wants to bring prices down and reverse the impact of fuel inflation on economic growth.” However, it is not clear that the market was being so rational.

"This is just a market that rolled over and started feeding on itself," said John Richards, head of North American strategy for the Royal Bank of Scotland, according to the Huffington Post. "There was no triggering single event of news that would account for this. It's just much more the market's own internal dynamics taking prices down here," Richards added. “Internal dynamics” sounds a lot better than “feeding on itself.” The latter implies a growing disjunction between price and the “underlying” supply and demand for the commodity, whereas the former intimates a self-sustained system tending to equilibrium. 

Broadly speaking, the question may be whether a market for X tends internally to a homeostatic state of equilibrium or a schizogenic condition wherein a maximizing variable breaches any equilibrium-enforcing features. In ecological terms, by analogy, the question is whether a species tends to maximize its growth even at the expense of the overall ecosystem. In terms of the oil commodity market, the question is whether people simply betting on the price without any intended future use effectively divorce the market price from the actual and expected supply and demand. Moreover, does the disjuncture increase such that the betting acts as a maximizing variable at the expense of any equilibrium-tending mechanisms of the market itself?

Even if the “freefall” drop in the price of oil evinces a return to equilibrium closer to supply and demand, the disjuncture itself caused people to put off vacations and spend less on even necessities, and generally feel poorer. There is thus an ethical question regarding the legitimacy of betting on a commodity that people need. This includes not only oil, but food as well. Specifically, is the freedom to bet on necessities (even if necessities in the short run) worth the ensuing harm to consumers? Moreover, is trading on a commodities market inherently intended or designed for bets or, more narrowly, to arrive at a price whereby consumption demand meets supply? What, in other words, if economic liberty undoes the purpose of a market?

According to Bart Chilton, a top regulator at the Commodities Futures Trading Commission (CFTC), the number of speculative bets on oil and food were at record levels at the time of the price increases in both oil and food. President Barack Obama created an oil market fraud group in April to provide enhanced regulatory scrutiny of potential fraud and manipulation in the oil futures and derivatives markets, but most speculation was perfectly legal at the time so the reach of the group was rather limited in comparison to the problem.

Eric Holder, the U.S. Attorney General, wrote in a letter to the group, "Of course, there are lawful market forces that lead to price fluctuations and to differences between wholesale and retail price trends in these markets.” He urged the group “to identify whether fraud or manipulation played any role in the wholesale and retail markets as prices increased. If wholesale prices continue to decrease, fraud or manipulation must not be allowed to prevent price decreases from being passed on to consumers at the pump." However, manipulation in the form of betting was legal at the time. Even so, the financial reform bill passed in 2010 requires the CFTC to craft rules reining in excessive speculation. Nevertheless, citing inadequate market data, the agency failed to meet a key deadline on those rules in early 2011.

Accordingly, U.S. Sen. Bernie Sanders (D-VT) sent a letter to President Obama on the day of the “freefall” urging that regulators impose limits on oil speculation. “There is mounting evidence that the skyrocketing price of gas and oil has nothing to do with the fundamentals of supply and demand, and has everything to do with Wall Street firms that are artificially jacking up the price of oil in the energy futures markets,” Sanders wrote. “In other words, the same Wall Street speculators that caused the worst financial crisis since the 1930s through their greed, recklessness, and illegal behavior are ripping off the American people again by gambling that the price of oil and gas will continue to go up.” The question is whether “artificially jacking up” prices of commodities that people need ought to be illegal, and, if so, whether such a law could even be enforced.

Should futures traders be required to take delivery and use the commodity they have purchased? If so, people seeking to hedge risk may not be able to do so. Is not the “too big to fail” story about too much risk? Perhaps other means of hedging could be used. Furthermore, it may be that the government officials were not going far enough structurally. Were they to have incorporated anti-trust law, applying it strictly, perhaps a more competitive oil market would obviate the baleful effects of speculators. Even if there would be some opportunity costs in the reduced economies of scale enjoyed by oil companies (and gas stations), a market mechanism running on more competition would be worth that cost to the particular firms. The common good outweighs that of individual companies.

In going after “excessive” speculation or oligopolies, the devil may be in the details. For example, regulation may be difficult to write—assuming the corporate lobbyists do not obstruct it from even getting to that point (e.g., the failure of the CFTC to issue regulations)—not to mention enforcement. In a system of corporate capitalism, moreover, representative democracy may not be able to provide a homeostatic remedy after the horse has run out of the barn.

Sources:

Matthew Robinson, “Oil Crashes 10 Percent in Record Rout,” Reuters, May 5, 2011.

William Alden, “Oil Prices Plunge in Record Sell-Off,” The Huffington Post, May 5, 2011.

Zack Carter, “Eric Holder to Fraud Squad: Oil Price Plunge Should Benefit Consumers,” The Huffington Post, May 6, 2011.

A Weak Economy as a Competitive Advantage to the Largest Corporations

Size matters, at least in the business world. Richard Fuld, the last CEO and Chairman of Lehman Brothers, overextended "his" bank with risky real-estate and financial derivatives in part so Lehman Brothers would be as big as Goldman Sachs. 

Empire-building (and ego) aside, the largest corporations can indeed perform differently than smaller firms in an economy. In April 2013, it was clear that the biggest companies were outpacing smaller ones. Analysts estimated profits for the 100 largest companies in the Standard & Poor’s 500 stock-index to rise 6.6% in the second quarter, while earnings for the bottom 100 were expected to fall by 1.6 percent. Of all the profits earned by the companies in the S&P 500, 22% would be coming from the 10 largest companies, enabling them relatively more wherewithal with which to gain still more market share. Put another way, beyond a certain point, organizational size can protect or buffer a company in the midst of a languid economy. It is not only the market mechanism that accounts for this phenomenon.
One benefit enjoyed by the big corporations is being able to profit from other markets around the world and thus make up for a slow market at home. Smaller firms, with little or no access globally, are more constrained in the sense of being limited to the conditions of the domestic economy. Additionally, large companies enjoy easier access to credit. A bad economy need not keep the biggies from making investments in expanding operations still more, hence building on their existing size-advantage. There appears to be a certain threshold in organizational size beyond which the size of a company's operations can act as a buffer mitigating the negative effects of a slowing economy. It may even be that the market mechanism itself rewards size, and in so doing facilitates the shift from competition to oligopoly or even monopoly in a given market. This does not necessarily result in greater efficiency in business or benefits for the consumer.

Once an organization reaches a certain size, diseconomies of scale kick in. Further increases in size bring disproportionate increases in costs, which counter the earlier economies of scale. As argued by Thompson in Organizations in Action (1967), as organizational size increases, the cost of integrating the various divisions and departments increases more than proportionately. In fact, coordination and integration can become virtually impossible once an organization has reached a certain size. For example, banks like JPMorgan and Bank of America may be so large that they cannot be effectively managed, not to mention in a cost-efficient way.

In addition to the impact from the market mechanism and business, federal legislation can benefit the largest corporations disproportionately or even exclusively, thereby widening the gap between the "haves" and "have nots." For example, federal budget-cutting tends to hurt small business more than large corporations. Also, large corporations like G.E. can afford to lure tax experts away from the IRS in order to minimize the corporate income tax liability. In fact, G.E. got away with zero tax in 2010, despite having earned billions of dollars in the U.S. that year. 
Furthermore, large corporations have considerably more lobbying power than do small companies. With some strategically-placed political campaign contributions, a large company can get its particular situation explicitly exempted in proposed tax legislation. In some cases, the companies or their lobbying group have even given the tax-writing Congressional staff the legislative language--saving the staff some work.

A large corporation can even create a sustainable competitive advantage for itself by getting Congress to increase the tax burden on smaller firms! Applied to the formulation of regulations by regulatory agencies, a large company with exclusive access to domestic and even international market data can "give" it to the regulators, who depend on such data in crafting regulations that will be effective in the market. Of course, the company can use its informational asset as leverage with which to sway regulators to soften the regulations in a way that benefits the company over its competitors. Even the prospect of future, well-compensated employment can influence a regulator to see to it that the future employer will not face regulations that are too costly. Otherwise, the eventual salary of the regulator-turned-regulatee could be lower amid the lower profits from costly regulations. This use of assets to sway regulators to go easy on the company (but not its competitors!) is known as the strategic use of regulation. I submit that organizational size facilitates such use because the assets that can be used as leverage are more valuable to regulators.

The power of large corporations over public policy and regulations is not the market mechanism at work; rather, it is a manifestation of plutocracy at the expense of representative democracy and the public interest. In a plutocracy, the good of the part trumps the good of the whole. This is sub-optimal for the whole because the interest of a part is not necessarily in line with the interest of the whole. Accordingly, public policy can be justified in countering the “artificial” advantages of organizational size in the political arena. Furthermore, even the size bias of the market mechanism and business itself could be reduced or even countered as per the public interest in more competitive markets in place of oligopolies and monopolies. This would take thinking systemically from the perspective of the public interest.

Source:

Nelson Schwartz, “As Wall St. Soars in Tough Era, Company Size Is a Big Factor,” The New York Times, April 15, 2013.

Oligarchic Social Media Companies: Willowing the Internet Unethically

Too much power in a few hands is inherently dangerous. That goes for private as well as public, or governmental, power. In the world of social media, the companies that own and control the platforms are essentially governmental in nature in that the executives promulgate rules and, ideally, see that they are enforced. The downsides to too few platforms—each with an extraordinary amount of power—involve a constricting of ideas, or content, on the internet, and potentially unanswered violations of the rights of the social-networks’ respective users. The public policy repercussions, I submit, include applying anti-trust law to social media companies such that none gets to become as massively dominating as Facebook had been allowed to become.

In an open letter in March, 2018, Tim Berners-Lee, the inventor of the World Wide Web, proposed a regulatory framework to balance the interests of the social media companies and their users. In the wake of the Facebook scandal then involving the psychological-political manipulation of up to 50 million users by a third party, Cambridge Analytica, the obvious inference was that privacy rights were in dire need of being shored up by regulators as Facebook’s management had failed even to notify the users of the invasive  use of their data. Yet a single-minded focus on that problem risks missing a more subtle one.

Berners-Lee points in his letter to the “concentration of power” in a few social media companies that “creates a new set of gatekeepers, allowing a handful of platforms to control which ideas and opinions are seen and shared.”[1] As a result, the “Web that many connected to years ago is not what new users will find today. What was once a rich selection of blogs and websites has been compressed under the powerful weight of a few dominant platforms.”[2] The bloggers who can make good use of Facebook’s algorithm get to see their ideas (and blogs) popularized, whereas bloggers who eschew Facebook stand a greater chance of being relegated to a marginal position on the internet.

I am a case in point. I could have made use of Facebook for years to promote essays I have posted online, but I made a decision on principle not to use Facebook because of how that company had treated my attempts to create and use an account. On my first attempt, Facebook suspended my account because I had sent some text with a link to one of my academic articles to some scholars whom I actually knew. No one at Facebook bothered to ask me if my posts were spam. I was deemed to have sordid motives without much evidence to support the projection of distrust. I deleted the account. A few years later, I tried again. That time, Facebook demanded that I upload a clear facial picture of myself so I could be identified. Facebook had verified my phone number and email address, and thus my name, but strangely those were not enough. I had not yet even used the account and thus could not have violated any of the company’s use-policies, so the projection of distrust onto me was unacceptable to me. So I deleted that account rather than supply a picture of myself to be scanned. I was also concerned how the facial recognition software would be used, especially when combined with other basic information I had included in the profile. It turns out I had reason to be concerned, for even if my personality had not been construed and I had not been subject to political manipulation psychologically, the fact that Facebook failed to prevent the invasive actions by a political firm in 2015 means that other harvesting of data could have been going on without the users being informed. Even before that scandal broke, I did not trust Facebook’s staff.  

I suspect that the fact that I had written a booklet, Taking the Face off Facebook, had something to do with Facebook making it difficult for me to create and use an account. That the platform was at the time so huge means that keeping me off made it much more difficult for me to popularize my essays at The Worden Report. If so, Facebook was exploiting a conflict of interest by keeping off ideas critical of Facebook’s management. Although I made considerable use of LinkedIn and some use of Twitter, I felt as though I was swimming upstream in steering clear of Facebook as a possible means of publicizing my site. Even though business ethics was one of my areas of expertise, and thus of the essays on my site, I felt a strange feeling in actually making a stand ethically against my own use of Facebook even though I really could use the added publicity for my site.

A faculty member at the University of Chicago business school wrote me interestingly just after the Facebook scandal became public that if only I would get on Twitter and Facebook and attack the positions of other people, my essays would be picked up by the major media and I would no longer be making things harder on myself than need be. If only I “attack people.” Really? The University of Chicago must be quite a place! Another ethical line in the sand that I would not cross. Years earlier, I had stopped attending the Academy of Management “academic” conferences because the “scholars” had made a “blood sport” out of tearing apart scholars giving paper-presentations. I found that I could be helpful to the presenters by instead suggesting fruitful directions rather than trashing what had already been written. Any dead wood would eventually fall off from the tree anyway, whereas a useful insight would be sited and thus popularized. I had the same philosophy about my essays, sans any “facilitator” like Facebook. I suspect that Facebook’s culture might have been allowed to become akin to that of the Academy of Management. If so, vindictiveness could be added as a reason why the range of ideas on the internet has been narrowed, and why more attention was not devoted to enforcing policies on the third-party uses of user data. With great power comes great responsibility, so does the power remain when it has become clear that the responsibility has been lacking?

In short, social media companies like Google and Facebook had been allowed by the U.S. Government, and ultimately the American people, to get too big—too much coverage and control of the internet. There should have been another platform similar to Facebook’s that I could have used to reach more readers. Heather West of Mozilla stated at the SXSW conference in 2018 that people were “realizing the power that technology has in our lives and [were] asking technology companies to be more transparent and responsible.”[3] I doubt that, and, besides, I submit that something more than asking was needed. Social media companies like Facebook were clinging at the time to their mantra that they merely provide platforms rather than the content (or even curating it). That is similar to Goldman Sachs insisting in the wake of the financial crisis of 2008 that the bank merely puts markets together, rather than acts also as a proprietary player in them. At the SXSW conference, Kara Swisher of Vox Media and Christiane Amanpour of CNN mocked Twitter and Facebook for insisting, “We’re a tech platform that facilitates media.”[4] A conflict of interest is in even just that, for which media is to be facilitated and which relegated as problematic? Clearly, fake political ads are problematic, but are the social critics whose range includes critiquing social media companies also problematic? Perhaps Facebook’s actual role is a blend of public and private—a private sector government, one might say. If so, democratic accountability, and even that by stockholders, is problematic and thus not to be relied on.

The answer is more government regulation of companies like Facebook, essentially meaning that the public governance functions of Facebook should be overseen at the very least by public policy rather than corporate governance and pressure from users. But government regulation has its limits. Regulators cannot be everywhere, and they cannot get at the problem of the willowing of the blogs on the internet due to factors controlled by the social media companies. For there to be a true democracy of ideas on the World Wide Web, alternative platforms of substantial but not dominating scale  must be viable without being snuffed out by a bloated platform like Facebook’s. Breaking up that company could mean that potential upstarts would get a chance to grow without being bought out and shelved by the giant. Oligopoly is not good for competition, and whether or not an industry is permitted to attain an oligarchic structure is a matter for governments to decide, and ultimately electorates.

For more on this topic, 

See the essay, "Facebook: A Distrustful Company."

See also the booklet, Taking the Face off Facebook

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[1] Rob Pegoraro, “SXSW Takes a Skeptical Look at Tech,” USA Today, March 13, 2018.

[2] Ibid.

[3]Ibid.

[4] Ibid.

Wen and Obama: Breaking Up the Banks

Chinese Premier Wen Jiabao told a radio audience on April 3, 2012 “that China’s state-controlled banks are a ‘monopoly’ that must be broken up.”[1] He also urged other businesses to get into the financial sector. “Let me be frank,” he said. “Our banks earn profit too easily. Why? Because a small number of large banks have a monopoly. To break the monopoly, we must allow private capital to flow into the financial sector.”[2] This included raising the total amount foreigners can bring into China under the Qualified Foreign Institutional Investor program to $80 billion.

Besides combined earnings of a bit over 632 billion yuan ($99 billion) in a slowing economy, the largest banks—Industrial & Commercial Bank of China, Bank of China, Agricultural Bank of China, and China Construction Bank—were able to raise fees indiscriminately, sparking the popular resentment that Wen was able to tap on the radio. Beyond the unfairness of the windfall profits, the artificially low cost to the banks in borrowing from domestic savings accounts meant that investment has proceeded at the expense of consumption. Given that the current account surplus stood at just 2.7% of GDP in 2011 due to slackening demand in Europe and North America, the imbalance regarding consumption could already be seen as a potential constraint to economic growth.

Therefore, Wen’s strategy in going after the unpopular banking oligopoly was wise both politically and economically. The question at the time was whether anything would come of his remarks. “The major question is whether increasing rhetoric and new initiatives toward economic revisions will lead to broader reform. Prior efforts have faltered amid Beijing’s drive to keep a tight rein on the economy and opposition from interest groups.”[3] That Wen made his remarks as he was preparing to leave office may mean that they should be regarded as akin to President Eisenhower’s “Beware the military-industrial complex” farewell speech. A swan song is not apt to be followed by still another act.

In terms of lessons from a comparative approach, it would be ironic, to say the least, were the Chinese government willing and able to break up the four largest banks while the Dodd Frank Act of 2010 in the U.S. let the banks too big to fail remain intact in spite of the plights of Bear Stearns and Lehman Brothers in 2008. That is to say, if the Chinese government could have taken on its powerful banks, the U.S. government would have looked comparatively weak as against the American banking sector.

Lest it not be forgotten, however, President Andrew Jackson’s defunding of the Second Bank of the United States at around 1830 was daring even bank then when the financial sector was smaller relative to the U.S. economy as a whole. Five or six years later, Congress finally got around to ending the bank’s charter altogether. Jackson’s argument was that having a bank would make Congress, and thus the U.S. Government, too powerful in the American federal system. The dangers to the American republics in having a powerful moneyed interest were also not lost on the nineteenth-century president.

Therefore, we can view the Dodd Frank Financial Reform Act of 2010 through the lenses both of China, assuming something comes of Wen’s remarks, and of American history. President Obama barely broached the subject of breaking up Wall Street banks even though they had been culpable in the derivative mess. Congress would hear nothing of it.  The Chinese government may not be so constrained by the self-serving interests of its banking oligarchy.

Similarly, claims that President Obama’s reliance on private health-insurance companies rather than a state-owned entity in his Affordable Healthcare Act of 2010 was somehow socialism (i.e., ownership by the state of means of production) can also be viewed relative to a Wen’s criticism of the state-owned banks (which favor state-owned enterprises in terms of lending). Obama caved to the private health-insurance company lobby on even a public option, whereas Wen suggests that the Chinese government might break up the four biggest banks. Is the Chinese state stronger than the U.S. Government relative to the interests of private capital?

Relative to the “socialist” leader’s distancing himself from a bias toward state-owned banks (and enterprises in general) in China, President Obama’s support of both the Dodd-Frank and Health-care Affordability laws can be seen in retrospect as anything but advocating U.S. Government ownership of means of production/services. Wen’s remarks show a movement away from socialism, toward Obama’s stance, though perhaps with government rather than banks in the driver’s seat.

1. Dinny McMahon, Lingling Wei, and Andrew Galbraith, “Chinese Premier Blasts Banks,” The Wall Street Journal, April 4, 2012.

2. Ibid.

3. Ibid.

Windfall Oil Profits

Conoco Phillips reported a 66% increase in earnings for the fourth quarter of 2011, “attributed to high crude prices and asset sales.”[1] With the prices of most crudes above $100 a barrel, the company gained a windfall that vastly made up for a drop of nearly 3% in its refining and marketing business. Chevron, on the other hand, reported a 3.2% decline in fourth-quarter earnings due to “poor refining results” that “overwhelmed higher revenue from oil sales.”[2]

Meanwhile, Exxon Mobil reported net income of $9.4 billion for the fourth quarter, up from $9.25 billion the year before. The company’s revenue of $121.6 billion was up 16 percent. The improved earnings reflected the $100 plus prices for many benchmark crudes, which resulted from “continuing unrest in the Middle East and North Africa and strong demand from China and other developing countries.”[3] To be sure, the company’s purchase of XTO Energy for $25 billion in 2010 meant that the plummet in natural gas prices also had a significant impact on the company. Even so, a company making nearly $38 billion on an annual basis raises questions on the sheer size alone, and whether any market can be competitive with such a giant.

Furthermore, the legitimacy of the windfall profits coming from political instability rather than any merit on the company’s part should also be questioned, as well as why Congress balked on a windfall profits tax for the industry in 2011. In other words, the market power is not the only kind of power we should be concerned about in looking at Exxon Mobil. Such a concern could extend to why George W. Bush decided to invade Iraq, given that that that country’s ruler had kicked American oil companies out in 1993 after the U.S. intervened to move the Iraqi army out of Kuwait. We could even ask whether the oil companies, or their agents in government, have had anything to do with the inciting some of the political stability behind the astronomical crude prices.

To be sure, Chevron shows us that even a big oil company can manage not to benefit from a $100-plus crude-price windfall. Moreover, oil executives could argue that windfalls are “necessary” as “cushions” against the prospect of a glut in natural gas, for example, or the need to do major work on aging refineries. Even with the inevitable vicissitudes that come with dealing with raw material markets, however, that the prices of crudes have gone so much higher than the costs of getting oil out of the ground suggests that the market mechanism has not been functioning as Adam Smith would have predicted—meaning an oligopoly has replaced a competitive marketplace.

John D. Rockefeller, whose effort to coordinate the refining industry in the U.S. via a huge monopoly called Standard Oil (of which Exxon Mobil is a descendant), could point to all the bankruptcies amid the “excessive competition” in the 1860s as justifying even a monopoly in place of any competition at all. He used means that would be considered very unethical today to get competitors to “agree” to be bought out by the combination so there would be no “destructive competition.” Even if it was necessary in the early years of the oil industry, we ought not assume that huge oil companies are necessarily the legacy we must pass on to the next generation.

1. Clifford Krauss, “Higher Oil PricesRaise Earnings at Exxon Mobil,” The New York Times, February 1, 2012. 
2. Ibid.
3. Ibid.

Wall Street Banks: Price-Making and Law-Breaking?

The U.S. Senate Permanent Subcommittee on Investigations found in 2011 that “two Goldman employees, Deeb Salem and David Swenson, tried to manipulate prices of securities used to bet against mortgages. Both tried to help Goldman pile on larger bets against the mortgage market, and they wanted to be able to buy such negative bets more cheaply, the report said. Goldman, as a broker, was able to affect prices in the market through the bids and offers it gave out. Mr. Swenson wrote in May 2007 that the bank should try to ‘start killing’ prices on certain positions so that Goldman would be able to ‘pick some high quality stuff,’ according to the Senate report. The strategy, Mr. Swenson wrote, would ‘have people totally demoralized.’ The pair were unsuccessful in their attempt, and both denied making it to the Senate committee. Mr. van Praag said last week that the report had no evidence of manipulation. Still, the Senate report said that ‘trading with the intent to manipulate market prices, even if unsuccessful, is a violation of the federal securities laws.’”[1] I submit that it was also unethical. 


The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available at Amazon.com.

1. Louise Story and Gretchen Morgenson, “S.E.C. Case Stands Out Because It Stands Alone,” The New York Times, May 31, 2011.

The Conflict of Interest in a Silent Oligarchy Being Engaged in Its Public Policy

Goldman Sachs, which had played a role in enabling Greece to hide its public debt, urged investors in March of 2010 to buy shares in two big health insurance companies, UnitedHealth Group and Cigna. The reason: their rates were sharply up and competition was down. According to The New York Times, the White House claimed, “ the Goldman Sachs analysis shows that while insurers can be aggressive in raising prices, they also walk away from clients because competition in the industry is so weak.”[1] Rate increases ran as high as 50 percent, with most in “the low- to mid-teens” — far higher than overall inflation. 

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. David Herszenhorn, “Obama Wields Analysis of Insurers in Health Battle,” The New York Times, March 6, 2010.